The Vicious Downward Spiral of the 1990's

This week, I want to take you back a bit in history. I am currently in the
middle of reading Dan Raviv's engrossing and entertaining COMIC WARS book
on the great battle between Ronald O. Perelman, Carl Icahn, and
Ike Perlmutter for control of Marvel Comics during the late-1990's. This
is a battle that I followed very closely as it was happening, not only
because I was concerned about the future of Marvel Comics, but also
because I was (briefly) involved with a group that planned to make a bid
for Marvel. I'll write a bit about my adventures in that arena next week,
but this week I want to cast some doubt on a trend that Raviv alludes to
in his book, the great "comics speculator boom" of the early 1990's.

For those of you who weren't around during the early 1990's, that was a
period when the comics world underwent a tremendous spike in growth. Part
of that growth was ostensibly spurred by the purchasing of multiple copies
of new comics for future sale, by fans eager to replicate the enormous
"profits" generated by older fans who had purchased comics during the
1970's. While the speculation phenomena did, indeed, occur to some extent,
I find it troubling that this superficial analysis fails to address the real
cause of comics' woes during that period.

To be specific, after years of purchasing bulk comics on the secondary
market, I've come to the conclusion that the 1990's comic book speculator
is a myth. While I'm sure that most comics fans know of someone who was
purchasing large quantities of new comics during that period of time, I
really haven't seen many private collections offered to me that include a
large number of duplicates. I do see a lot of small collections that
include all the overprinted books from 1989-1995, but there are generally
only single copies.

So what happened? We all know that many of the early Image comics sold over
1,000,000 copies, as did the Return of Superman issues. What happened to all
those comics? I believe the answer lies in competitive nature of the comic
book distribution wars of the early 1990's. By that point in time, Diamond
Comic Distributors and Capital City Distributing had muscled aside their
smaller regional competitors, and become the two dominant national comic
book distributors. Part of the way in which they gained market share was
to have incredibly easy terms under which comics collectors could graduate
into becoming comics dealers. The requirements to become a dealer were so
low that an initial order check for $300 could set you up with either
company as a "bona fide" account in good standing.

In 1979, when I helped persuade Marvel to open up their distribution system,
I was an advocate of having a low entry cost to become a comics retailer.
In those days there were only about 800 comics shops in the world, and
comics fans were leaving the hobby because they couldn't find their comics
any longer in their local drugstore. We desperately needed more comics
retailers at that time, and having a low entry cost helped quadruple the
number of active retailers in a span of about five years. This growth was
much needed, and helped save the industry from collapse.

By 1990, while distribution of comics consolidated into the "big two," the
number of comics shops and/or comics retailers continued to grow very
rapidly. The peak number that I heard during the Spring of 1993 was that
there were approximately 10,000 active comics accounts in the US, with an
additional 1,000 overseas. This was the period in which almost any comic
published by the major publishers sold 50,000 copies, and it took sales of
at least 250,000 copies to be considered a "hit."

The only problem with these numbers is that the comics "retailers" who had
been lured into the business by Diamond and Capital were very inexperienced,
and grossly undercapitalized. They were often long on comics knowledge and
enthusiasm, but knew very little about operating controls, and nothing about
how to manage a business. Making matters even worse, Diamond and Capital
were so self-involved and greedy that they had no compunctions whatsoever
about helping these neophytes set up in direct competition with their
existing accounts. This quickly led to a situation where the new retailers
cannibalized volume from their better managed competitors, thus setting the
stage for both to fail.

The pinnacle of this ridiculous numbers game was the 1992 Diamond Retailers
Conference in Baltimore, MD. Steve Geppi had his lieutenants do a full-court
press for attendance at the show, and an astounding 3,100 "retailers" came
to the conference. I remember one seminar where the Diamond staff asked how
many people in the audience had gotten into the business within the past
two years. Over half the members of the audience raised their hands. It
didn't take a genius to figure out that this was far too much growth, in
a very short period of time.

Returning to the subject of the myth of the private speculator, I now am
seeing the bitter harvest of Diamond and Capital's duping of these gullible
would-be retailers. Over, and over again, I am offered deals containing tens
of thousands of comics from the early 1990's. Invariably the story goes
"My ---- had a comics shop for X years, and finally closed in 199X. These
are the comics they had left over when they closed. We're sick of storing
them, what will you give us for them?" Sadly, I can almost never offer more
than a few pennies per book. Most books from that period are in such
oversupply that it will be decades before they ever sell for cover
price.

In the end, the real losers of the early 1990's were the poor people who
got suckered into owning comics shops, only to fail because they were
unable to sell a high enough percentage of the new comics they were
ordering. The distributors made out like bandits (at least until these
new retailers failed...), but the publishers were completely taken in by
the robust numbers coming in from the distributors. They actually thought
all the comics they were printing were selling to eager fans, when in fact,
I estimate that at least 30% of all the comics being published from
1990-1994 ended up as overstock in comics dealers inventories. When the
weight of these unsold books finally collapsed the retail end of the
business, the publishers saw their numbers decline drastically. This
led to a cutback in the number of titles being published, which led to
less product for retailers to sell, which led to even more retailers going
out of business. Thus began vicious the downward spiral of the 1990's.

Next week, I'll explain why I believe that Ronald O. Perelman did more to
harm to the world of comics than Frederic Wertham.